Top 6 Tips For A Successful Succession Plan

If you own a successful financial advisory practice, you may have thought about creating a succession plan to prepare for retirement. The advisory business is much more sophisticated than it was a few years ago, and while making a succession plan may feel like a daunting task right now, it’s better for both you and your business to start planning early. At advisorRETIRE™, we understand how challenging and emotional it is to retire from your financial practice, which is why we’re dedicated to helping make your transition to retirement a smooth one. If you’ve been thinking about retiring within the next five years, there are a few best practices to keep in mind while you work through the succession planning process.

Succession Planning Tip #1: Start Planning Early

You may be wondering when the best time is to start thinking about succession planning, and the answer is now! A succession plan must clearly indicate a series of decisions that will specify how ownership and management will transition when certain unforeseen events occur. While you may feel overwhelmed about planning for retirement a few years in advance, it’s important to remember that any steps you take now will relieve you of stress in the future. A few key considerations and questions to ask yourself are:

• How much will your retirement lifestyle be dependent on the sale of your practice?
• Are you mentally, emotionally, and physically ready to step away from the business you’ve created?
• Are you planning on selling your financial advisory business to a senior or junior partner or do you plan to look outside of the company?
• What is the most advantageous way you can receive the payout?
• Are you looking to receive a lump sum or single payment during the buyout process?
• Do you have a designated broker who can help you with the finances?

Succession Planning Tip #2: Find The Best Way To Sell Your Practice

If you plan on selling your financial advisory practice upon retirement, there are two main types of sales processes to consider: internal and external. An internal sale will target a family member or employee, while an external sale is when you sell your business to another firm. Let’s take a closer look at these:

Internal Sale

If you plan on selling your practice to a family member or trusted employee, you may want to start your succession planning early. It’ll be up to you to train them how to run the business while ensuring they can handle the various parts of your organization’s finances. A common struggle of business owners is that they tend to keep everything about their company stored in their heads, so it might be a good idea to write down all of your business processes so the new owner has something tangible to reference. This type of sale is often financed over an extended period of time.

External Sale

During an external sale, there are many different ways you can go about selling your financial practice. If you sell your company with a complete transfer of your book, you can opt to oversee the transition for six to twelve months after the sale. This can help to ensure that your hard-earned customers are being appropriately cared for by the new business. You may also choose to do a partial-book sale, where you only sell a portion of your clients so you can retain a few for your own personal practice. When negotiating with an external buyer, the price of your business will likely be based on the last twelve months of revenue.

At advisorRETIRE™, we’ve helped thousands of independent advisor’s carefully map out their succession plans to prepare for retirement. Whether you plan on retiring this week or within the next five years, our succession planning experts can help to ensure your transition is a smooth one. We’re here to provide a proven way to care for your clients as you cash out of your practice and prepare for retirement. Contact our experts in Lake Mary, Florida today to learn more about our services!

Succession Planning Tip #3: Identify & Nurture Internal Talent

If you plan on selling your independent advisory practice to a family member or employee, it’s wise to start identifying potential candidates among your team sooner rather than later. The leading firms don’t wait until it’s time to elect a new managing partner before taking note of their internal talent. If you have a continuous identification process that helps you to select future leaders, this will help your business tremendously.

It’s important to note that succession planning isn’t something you just do once and forget about. To be a conscientious business leader, you’ll want to continuously revisit your plan to reflect changes in company value, market conditions, and employee status. While many independent advisors tend to get caught up in fairness and company equity, it’s critical to have realistic expectations when it comes to evaluating your current employees.

Succession Planning Tip #4: Stay Clear About Your Personal & Financial Goals

If you’re a financial advisor who is hoping to retire within the next few years, it’s important to be clear about your personal and financial goals before you start your succession plan. If you’ve been building your advisory firm from the ground up for the past twenty-five years, exiting your company may bring up emotions of sadness and even depression. A succession plan can help put your mind at ease when it comes to retirement since all of your ducks will be neatly aligned for success.

Succession Planning Tip #5: Communicate With Your Team & Clients

Without proper communication, your employees and customers may feel you are retiring because you are unsatisfied with the business. This is not the impression you want to leave upon preparing for retirement. The more advanced notice you can give your staff and clients about your retirement plan, the less stress they’ll feel when the time finally comes to hang up your advisory coat. The last thing you want to do is spring your retirement as a last-minute surprise, and creating a successful succession plan will assure your employees and customers that they will still be taken care of upon your departure.

Succession Planning Tip #6: Consult With Your Resources

A proper succession plan will require the business owner to consult with a number of different resources. More often than not, the business owner has developed relationships with trusted financial advisors, bankers, accountants, and legal counsel over the course of their careers. These can be great resources to reach out to in the beginning stages of succession planning. When you make a point to include people with different perspectives in your planning process, you’ll be able to create a well-rounded and comprehensive approach to your retirement.

If you feel that working with a financial advisor will help make the succession planning process easier, go for it. A professional advisor can help guide you along your succession plan in a smart and delicate manner. If anything, your mind will be put at ease working with an experienced professional.

The Benefits Of A Succession Plan

Succession plans do not always unfold as the business owner envisioned. In some cases, the CEO may unexpectedly die, become incapacitated, or take an employment offer they were unable to refuse. When you make a point to invest in your succession plan, you create and stable and sustainable platform that will help guide the company forward in the case of an unexpected crisis. A solid succession plan also offers stability to lenders, investors, suppliers, and customers, which can serve as a wonderful retention tool.

Succession Planning with advisorRETIRE™

An effective and well-planned succession plan will help guide your business down a roadmap to success. When you commit to creating and implementing an effective succession plan, your employees and customers will thank you.

When you work with the succession planners at advisorRETIRE™, you don’t have to worry about doing all of the legwork on your own. Our knowledgeable staff can help you lay down the groundwork for your succession plan to make your retirement transition as seamless as possible. Whether you plan on closing your business completely or selling it, our experts will work with you one-on-one to ensure your succession plan and retirement plan is properly aligned. If you’re interested in learning more about our effective succession planning process for independent financial advisors, contact us today!